Leased property / market value

[thevaluator]

If an appraisal is completed on a leased multi tenant commercial property for market value in fee simple ...is an income analysis required to analyze & value the existing leases [leased fee] if the actual leases' could not be obtained.
or simply put... can you value the fee simple interest of a leased property?

Just a bounce to all the great AF minds out here

 

[Meandering]

Fee simple, subject to existing leases, if existing leases are one year or less.
Income approach, direct capitalization based on market rents, and vacancy and collections for similar properties in similar locations.

 

[Howard Klahr]

There is no such thing as fee simple subject to existing leases. It is either leased fee or it is not. However, you can evaluate the fee simple value of a property encoumbered by existing leases. hypothetical condition.

 

[thevaluator]

My understanding completely. Is it HC or EA if the leases can not be verified?
Thank you Howard.

 

[The Warrior Monk]

Fee simple (assuming no leases) would be a hypothetical condition, since the property rights valued are other than what exists.

Extraordinary assumptions would be used if you are using lease data that cannot be verified.

 

[thevaluator]

If you dont have the leases... how do you know they exist?
if it is an extrasordinary assumption is that fee simple?

 

[Howard Klahr]

It doesn't really matter how you classify the assumption, just explain what you know, what you have been told and what you have done.

 

[Artyman1200]

If an appraisal is completed on a leased multi tenant commercial property for market value in fee simple ...is an income analysis required to analyze & value the existing leases [leased fee] if the actual leases' could not be obtained.
or simply put... can you value the fee simple interest of a leased property?

Just a bounce to all the great AF minds out here

Fee Simple = Leased Fee + Leasehold. If the rent is below market then you have a positive leasehold position and a negative leased fee position, and vice versa. Either way, it all adds up to fee simple, so your fee simple is market value. Beyond that, just provide the interest value your client has requested.

If you know for a FACT that the terms of the lease(s) aren't true or the lease(s) don't exist, it would be a hypothetical condition. If you're only uncertain, it's an extraordinary assumption.

 

[Louis Pompeo]

Dave Wimpleburg has it right - above...

 

[Howard Klahr]

Fee Simple = Leased Fee + Leasehold

This is very simplistic and in certain situations very wrong. You need to review valuation of partial interests. The sum of the parts does not always equal the whole.